In December 2012, I wrote an article called “Palladium, the New Gold?”:
http://profitimes.com/free-articles/palladium-the-new-gold/
Recently, Gold and Silver have been weak, to say the least. Palladium on the other hand, has been surging non-stop since the end of October, from below $600 to $700 at the moment. Palladium has outperformed Gold recently.
This can be seen in the weekly chart below, which plots the Palladium price divided by the Gold price. A rising ratio means Palladium outperforms Gold. We can see that the ratio recently broke out above the red resistance line, meaning the downtrend has stopped.
Since the RSI is far from being overbought on a weekly basis, there is plenty of room to the upside…
When we then look at the Monthly chart, we can also see a breakout above the red resistance line, just like in 1996-1997…
The MACD is about to make a positive crossover, and the RSI is showing a similar setup as in 1997. From 1997 to 2001, the ratio rose from 0.35 to 4! At some point, Palladium was 4 times more expensive as the price of Gold…
Since we now have a breakout on both the weekly and Monthly charts, this could imply that a new uptrend has begun.
Now, let’s have a look at how the Ratio performed:
As we can see from the chart above, Palladium has done extremely well compared to Gold since late 2012, and the ratio is now almost at 0.60.
However, it was not really Palladium that advanced (although it did advance a bit), but rather Gold that got trashed.
Anyway, the strong performance of Pd is stunning to say the least.
Going forward, I would expect 0.6 to provide decent resistance, but once that level is cleared, I think the ratio will move up to 0.8 in the blink of an eye, and I seriously expect the ratio to move up to 1.0 by early-mid 2014.
If Gold would then trade as low as $950, Palladium would also trade that high given a ratio of 1.0 to gold.
$950 from the current level of $747 would still be another 26%+ gain for Pd, while Gold could drop another 26% or so…
In my view, Pd is the place to be for the coming years.
If the economy gets better, demand for Pd will increase, thus helping prices.
If the economy gets worse, Precious metals might rise, thereby lifting Pd.
Palladium has extremely favorable Supply/Demand fundamentals, unlike Gold, which is more of an “investment” than an industrial metal.
Time will tell, but ever since the bottom of 2008, I have liked Palladium as my favorite precious metal, and continue to do so.
Oh yes, before I forget to mention it: Martin Armstrong also seems to be bullish on Pd:
http://armstrongeconomics.com/2013/06/12/palladium-not-gold/
